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Assume that the market for wheat is perfect competitive, with demand curve P = 5000 ? 0.01QD and a supply curve P = 1+0.1QS. Each identical wheat producer has a total cost curve given by T C = 1+Q+Q2 , which results in marginal cost of MC = 1 + 2Q.
1. Graph the supply and demand curves.
2. Find the equilibrium price and quantity.
3. What is the marginal revenue for each of the perfectly competitive firms?
4. Graph the ATC, AVC, AFC, MC, and MR curves for the firm.
5. What is the profit maximizing quantity of output for the firm? 6. How much profit does each firm earn?
7. What is the shut-down price for the firm?
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